Given that Canadian companies spend an average of 36 per cent of revenue on compensation, training and human capital expenses, it’s no wonder that senior management wants to achieve the maximum return on total rewards investments.
But, beyond paycheques, few employees understand the total value of the remuneration they receive. And most employers don’t talk about remuneration in a holistic manner. As a result, the total cost — the dollars spent by the company on employee compensation — rarely gets full recognition and the overall value is diluted.
How can an organization create a clear line of sight for employees between their work and all of the rewards offered by the company? With total rewards, or total compensation, statements. Issued annually or available year-round online, total rewards statements can help:
•employees understand the true value of their rewards;
•executives, HR and front-line managers articulate the employment deal; and
•employees become engaged to drive business success.
But before an organization launches personalized statements, it’s important to review underlying reward strategies.
Go beyond money
Many rewards are easy to define and understand. Base pay, vacation, incentive compensation and company stock plans are rewards with a hard dollar value attached. Employees typically focus on these rewards. In contrast, what the company spends on benefits — medical, dental, insurance coverage and retirement programs — is not something most people think about everyday. However they do have a cost associated with them and can be readily quantified.
What’s harder to put a dollar value on are reward elements such as flexible work arrangements, or career development and training. Yet research shows employees who are provided with appropriate help and information to manage their careers are far less likely to think about leaving.
Personalized total rewards statements are a highly effective way of bringing it all together for employees. They can clearly answer, “What’s in it for me?” by showing each employee the total value of their own deal — the amount a company is spending at an individual level in exchange for the work being done.
Total reward statements can vary widely in look and content — from a simple two-page annual statement printed in black text to online total rewards websites showing “up-to-date” data that’s refreshed regularly.
There are many options within this latter option. For example, an organization may not want a full-blown total rewards website. But if employees have web access, individual statements can be made accessible in PDF format to eliminate the cost of printing and mailing. One financial institution wanted employees to have a greater sense of ownership and reinforce the total value of the employment relationship with staff by using personalized statements.
The company issued the first annual personalized total compensation statements to employees in 1997. The statements were so well received by employees that the company moved to an online total rewards website in 1999 with secure access PDF statements for employees. Personalized information was updated quarterly.
In 2002, the site was transformed into a robust, interactive online total rewards site. Data is refreshed monthly and the site offers a host of modelling tools as well as print-from-web tools.
Today the site is not only a comprehensive personalized statement, updated monthly, but also the gateway to an array of benefits information and resources. Single sign-on protocol allows employees to link seamlessly from their total rewards site to third-party sites to perform transactions or view details about their HR programs.
Whatever route an organization takes, total rewards statements will help by:
•clearly articulating the value of rewards for both the company and employees;
•showing the true value of rewards — this hidden paycheque can represent 15 to 30 per cent of total compensation;
•communicating and educating employees about their reward programs, helping make the connection between employee rewards and business success;
•engaging employees by “bringing it all together” for them, showing the true value of their contribution, and by highlighting career and development opportunities.
Although executive statements can mirror those provided to broader workforce, the total compensation package for executives is often quite different. The advantages of issuing a separate, targeted rewards statement for the leadership group include:
•a consolidated, personalized view of the executive deal;
•increased transparency in light of current corporate governance climate;
•greater emphasis on company goals and wealth accumulation;
•comprehensive information source for financial planning; and
•increased page count and more sophisticated calculations to accommodate complex aspects of executive compensation.
Sharon Vanderwerff and Sylvia Ektvedt are both consultants in the communications practice of Mercer Human Resource Consulting. Sharon can be contacted at (416) 868 8912 or email@example.com and Sylvia can be contacted (416) 868 2716 or firstname.lastname@example.org.